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I went to Oracle OpenWorld as a guest of Oracle and came away with a variety of observations that I can share. Some of what I saw was under NDA and that will remain undisclosed though I have to tell you that I did not see any labs or next generation products beyond what my colleagues saw at the show. My secret experiences revolved around customer stories. I also went to an America’s Cup qualifying race as a guest and had a great time on San Francisco Bay. The only reason that matters is in case you think I’m cutting Oracle some slack. I won’t do that but I will say that I was treated well all week, thanks to the efforts of Susie Penner, who runs the influencers program and does a bang-up job, and others.

Some of my colleagues were grumbling, and perhaps have done so in print, that they didn’t get enough time with executives — or any at all in many cases (me included) — and that their experience was diminished by the lack of a good séance. I can only observe that with 50,000 or so customers and press in town your executives can only be spread so thin. More importantly, I have always found that when I call up I can speak with the person I need to find plus or minus some obeisance to the gods of Wall Street and the public company’s quiet period. My take on meeting with executives is to make a call when I need information and not to expect so much from a conference like this. To that point we had a good meeting with executives and product managers in May when Oracle held an analyst day.

I must also say though that the company makes an unnecessary distinction (my humble belief) between an analyst and an influencer. Analysts seem to get greater access and are sequestered from the influencers in part because they work for brick and mortar analyst firms while people like me who are analysts, bloggers and occasionally journalists, get lumped into a separate but equal program. But, as I say, I can always pick up the phone.

As a CRM guy, the show was a bit light on information and the impression I have is that Oracle is only two or three years into a transformation that starts at hardware and moves steadily up its stack to applications. The hardware announcements at OpenWorld were superb and I can see a bright future for all of computingdom (a new technical term to be sure and evidence of continuing innovation in Silicon Valley) with Oracle’s devices. But I have been saying this for three years.

Each year the Exa-hardware line (Exadata, Exalogic, Exalytics) gets more robust. This year the company finally aimed Exa-hardware squarely at cloud computing to claim a spot as a serious infrastructure supplier. It also announced a new version of the database (Oracle 12c) for its public/private/hybrid cloud strategy to complete the picture. I am not much of a fan of private clouds because they seem oxymoronic, like jumbo shrimp as Steve Martin used to say. But for many, the idea of a private cloud is what will finally get them to cloud computing and sooner or later true cloud computing will break out as hybrids die a natural death. But also, I see great gains for sustainable computing with these announcements and with them lower operating costs for users.

The private cloud, seen for what it is, is a transition state. Neither fish nor reptile, it is an amphibian capable of adjusting to multiple surroundings and it will be the parent of something better adapted to an energetically more stringent environment. This is the greatest differentiator between Oracle and all of its much further progressed competitors in the cloud in my opinion.

Oracle has hundreds of thousands of customers and most of the biggest companies in the world use its products. It will not turn on a dime and it will need to support its customers and their older products for many years as they transition to cloud computing. So, Oracle’s strategy cannot be the same as a pure SaaS player and I believe the two should not be directly compared without caveat. In fact, I think Oracle’s next big innovation will not be hardware or software related. It will focus on the high-wire act of changing its business model to subscriptions while encouraging its customers to do the same all while running full tilt into the future — just what you’d expect from a company headed by a yachtsman captivated by speed.

I was not impressed by the front office applications and they fell into three buckets – new product acquisitions, existing products i.e. those bought in 2005 and Fusion. The products that Oracle bought last year are all up and running as they were when they were purchased but they are only lightly integrated, I think. The glue that is supposed to hold them together was hardly in evidence. I am talking about Fusion. Whatever Fusion is going to be is still in the future as far as I can see and I can’t say much more than that because I didn’t get to see much. The older applications are quite literally getting older and the race is on between them and the new acquisitions to see if the new apps can spin up quickly enough. Fusion is a very important of that dance.

On the other hand the company has adopted RightNow’s customer experience or CX mantra completely and did a reasonably good job of introducing its customers to those social ideas. Unfortunately for me — and many of my colleagues who have been swimming in the social soup for many years now — Oracle’s CX Summit was aimed at its legion of neophyte customers. There’s nothing wrong with that. It accurately shows where everything and everyone is relative to social. But the net effect of it all is that we didn’t see behind the curtain and didn’t get a glimpse of what’s ahead in social for Oracle.

We did hear about the importance of social networking and collaborating and how Oracle Social Network (OSN) fills a void etc., etc. But I have profound doubts. I consider social as a recently blank canvass, which has been filled by things like Twitter, Facebook, LinkedIn and, yes, Chatter. In each case, creative types tried to paint it with transcendence and visions of what can be. Then consider OSN, a plow horse of a name that says “we checked off another box,” and you get an inkling of where Oracle is in its social rollout.

On applications, my net impression is that Oracle has not yet generated a lot of thought leadership. There are times when thought leadership is not as valuable but we are at a crossroads and the signs point to cloud, social, mobile and all of the above. The Oracle messaging was long on “here are the facts about our new products” but relatively short on the part that says “and here’s why that’s important to you in today’s economy/market place/world” pick one. Oracle wants to be the go-to technology business partner but to achieve that goal in a new generation they need to throw some fastballs down the middle of the plate. Every year I see progress and maybe next year they’ll get the thought leadership. It will be vitally important as the company moves not just into the cloud but more and more into the subscription economy and expects its huge customer base to follow suit.

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This week Zach Nelson, CEO of NetSuite, a.k.a. Larry’s other company, took over the Marc Benioff chair as guest antagonist but given the relationship between the companies the vibe was more sedate. For instance, no one went to the talk at the Lam Theater in Yerba Buena Gardens wondering if Nelson would be controversial or if he would utter the words, “We come in peace,” as Benioff once had. That much was a given.

Nonetheless, Nelson served roughly the same purpose as Benioff; he was the emissary from the cloud. He functioned as a third party thought leader pointing off in a future direction that Oracle itself could not for various reasons. Nelson’s direction and his talk cemented one of the key elements of cloud computing for large enterprises contemplating — what to do about the growth of increasingly expensive and hard to maintain ERP systems. In an era where data and decision-making are continuously being pushed down the chain of command conventional on premise ERP has a flexibility problem and that was the subject of Nelson’s talk.

For at least the last year various vendors have been talking about their two tier strategies in which they provide a second layer of ERP support or they cooperate with other vendors to do so. Nelson used his time to describe the advantages of using a product like NetSuite in a variety of ways that demanded a second tier of ERP.

For instance, a large multi-national company might use a second tier of ERP systems to capture local or regional data, convert currencies and adhere to local regulations before rolling the results up to corporate in a more tidy bundle. The two tiers could in practice be all NetSuite but Nelson’s point was to also support heterogeneous environments in which Oracle or SAP might be the corporate standard.

Finally, an question that is on lots of minds during a merger, acquisition or sale of a division is what to do about the financials. I have to confess that this is not top of mind for me but I can understand how it can be for the principals. Nelson’s point is that his product, by virtue of its cloud residency, can spin up a company very quickly and enable the separation or merger as the case may be.

The two tier strategy is a happening thing and I expect that we will hear more about it over time and not just from ERP vendors. Much the same argument could be made for front office conversions. As multiple conventional CRM systems begin to age out we might see SaaS CRM vendors trying to ease the transition for their own products.

Finally, two tier provides other benefits to companies such as limiting the growth of conventional ERP and initiating a transition that will move some to the cloud eventually and away from big ERP systems. That’s what Oracle can’t say on its own because as much as it would like to surround SAP systems with NetSuite and eventually convert them, it would not like to see the same thing happen with, say, Microsoft ERP surrounding and ultimately ejecting Oracle from an account. NetSuite has an inside track right now because it runs a complete Oracle stack which will make conversion easier while keeping it all in the family.

Zach Nelson’s talk was a success. He presented an appealing vision of ERP in the cloud and for that I think it’s a lock that he’ll be invited back.

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I’ve been at OpenWorld for two days as I file this but so far, I have little CRM oriented material. CRM really kicks in on Wednesday when the company focuses on CX or customer experience the moniker that Oracle has given to much of its CRM focus.

CX is good for what Oracle is about and some of the announcements about private cloud and high capacity storage fit well with the message. For the record, CX was a RightNow term that Oracle adopted when it bought the company last year for a cool 1.5 giga-bucks. Add to this about five other acquisitions including ATG, the ecommerce company, and some web analytics and all of a sudden Oracle became a potential Cloud and social powerhouse.

I say potential because it all needs to be hooked up into a coherent and consistent whole. That will happen, but it is a rather large undertaking. At any rate, Wednesday – the day you will read this – is when all will be revealed and I am very interested.

That’s not to say that there isn’t any news to discuss that’s relevant to our corner of the world. Front office has been in upheaval lately with the social and mobile revolution and it’s all driven by the cloud and here Oracle has stepped up smartly.

In the Sunday keynote, CEO Larry Ellison introduced the Oracle Private Cloud and some very interesting hardware to run it. I had previously said that I expected the company to turn its technology bonanza to the cloud and much of what I expected did happen though in ways that were slightly different from my original take. Nonetheless, the announced private cloud is a good idea and will sell well, I think.

Private cloud (PC) is built on Exadata X3 a new storage machine from Sun that sports 26 TB, yup, that’s terabytes, and it’s all silicon memory and very fast. There are spindles in the box but we aren’t counting them. That’s 26 TB of amazingly fast data, which is also compressed so the 26 TB is more like 100 TB. It definitely tips the huge-o-meter and the fast-o-meter into the red zone.

PC is also based on Oracle 12c a new version of the Oracle database built expressly for the cloud (that’s the c). The new DB has some nifty capabilities which enable it to nest databases within databases – can’t find my notes but it has a name. This nesting looks suspiciously like multitenancy to me but one big difference is that if you run only your own data in it, your data is not co-mingling with anyone else’s data. That will appeal to certain industries that are prohibited from co-mingling data – like banks – by regulators. I’ve never figured out why banks can co-mingle money but not data. Both are overlaid with a layer of metadata to keep them separate, but I digress.

So, it seems like Oracle wants to be in the infrastructure business providing computing power for a price. The company offers traditional on-premise, cloud and hybrid (the rose wine of computing?).

In truth, there will be a great deal of hybridizing over the next few years as some enterprises finally take their first tentative steps to the heavens (I mean cloud) and I think this is very good.

The Oracle private cloud and 12c finally provide a solution to the problems that have bedeviled some IT executives. They offer an elegant solution for moving to the cloud even if they are in some ways compromises. More importantly there is no going back to the data center once you are in the cloud and over time enterprises will be able to take greater advantage of what the cloud offers.

Most significant to me is the sustainability angle that all this provides and which everyone is avoiding discussing. It’s like everyone is whistling past the energy graveyard. Truth be told, data centers in the sky suck up giga-watts for running things and cooling them.

They cause big pollution as I referenced in a previous post. Much of the problem comes from under utilizing gear that has to run to keep the peas from touching the mashers on the plate – keep everyone’s data from mingling. Translation, there are many separate databases on separate and under utilized blades and spindles. Oracle PC and 12c start to eliminate the problem by providing ways to increase utilization, reduce the number of devices running and thus cut the energy bill. Not bad.

We’ve reached a tipping point where IT services are becoming more important to our lives for social and mobile computing needs but we’re also approaching limits imposed by power consumption and pollution and that’s where the private cloud can begin showing savings.

All this technology will, I think, help us raise our sights from 3 or 4 9’s of availability to something more like the 7 to 9 9’s we need for IT services to become a true utility. I’ll have more to post about when I get more information from the CX Summit. For now, it seems to me that after a slow start in cloud computing Oracle is trying to gain prominence and some of the company’s ideas will help get it there.

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I honestly thought I was going to have to wait longer to hear anyone from Oracle talk about seriously focusing the company’s hardware and software lines on the Cloud. True, they’ve been saying cloud-like things for a couple of years but the pronouncements were features and functions that added something to the cloud discussion without going “all in” as some others in the industry have said. But last night CEO Larry Ellison did what I’d forecasted last week in a way that is uniquely Oracle but nevertheless a good, defensible (and somewhat debatable) position.

It seems this family of hardware (Exa-hardware) is built and optimized for very big jobs involving terabytes of data and gazillions of users. That’s exactly the kind of stuff the growing cloud computing movement might gobble up. Currently data centers are masses of commodity servers in racks running feverishly but without a layer of sophisticated management that would optimize their utilization and reduce costs…

And,

The next logical step would be to endorse the Exa-hardware as a sustainability tool for a power hungry planet. I’m looking for some sustainability messaging from Oracle and it could even happen…

And,

Sustainability is not alien to ideas like mobility, cloud, social and analytics, you can’t separate them. I think if Oracle wants to maintain its leadership position with many of the largest companies in the world, it needs to put a stake in the ground and become a thought leader here…

So last night, Ellison took aim at the cloud and announced Oracle 12c a database for the cloud that supports multitenancy, if you want it, and he announced the Oracle Private Cloud running on Exa-hardware and delivered as a tight bundle to customers who want to get to the cloud, simplify their lives, and not fret about managing all that stuff. He also announced Exadata 3, which can hold up to 26 TB of data – “All your databases.” The cool thing about Exadata 3 is that the 26 TB is all silicone based memory, it doesn’t count the spindles that are rapidly becoming secondary in a high performance enterprise environment.

He made some traditional arguments about the cloud being more efficient and economic and at some points came close to claiming credit for inventing it. Truth is he did have a hand in inventing modern cloud computing as a very early investor in Salesforce and NetSuite and as the Zen master for Benioff and Nelson. But his skin in the game had been relatively minimal.

Now, while there is plenty to like from a sustainability perspective, it should be acknowledged that what got announced is a bunch of half steps designed to get enterprise data centers into the cloud without much disruption. I think this means that Oracle, for the moment (which will be about a decade) will not be aggressively selling the virtualization that comes with multitenancy and as a result there will still be a great deal of wasted power and underutilization in some cloud data centers.

But in a decade we could see a switch flip and everyone will get religion about power consumption and pollution and the switch to virtualization will happen very quickly because some very large companies will have been prepositioned for the change.

Actually a decade might be a long time and 6 or 7 years might be more like it simply because Oracle has many competitors going to the cloud, most notably Salesforce, and that will accelerate the timetable.

The next step, which has to come this week, will be for the company to shift gears to software – cloud based software – that makes the cloud even more attractive. Look for this to happen especially in the CX Summit or whatever they are calling it, on Wednesday. That will be the day that Anthony Lye talks a lot about how the companies he bought last year – like RightNow and ATG and others – are making the Oracle cloud a serious competitor.

Achilles’ heel is still Fusion. What’s up with Fusion?

Finally, many, if not most of the big cloud computing companies are running fault tolerant data centers using conventional racks of blade servers and disks. That’s giving us 3 to 4 9’s of reliability but I think before we can hope to get to the 7 to 9 9’s that will make cloud truly ubiquitous and universal utility grade computing we’re going to need some re-architecting. Regardless of what you might think of Oracle’s approach to the cloud, the hardware is an appealing approach for that alone.

Oracle likes to message that 20 out of 20 of the top banks/pharmaceutical companies/whatever, use Oracle and it wouldn’t surprise me if they’re going for 10 of the 10 biggest cloud companies. That will take some work and given the multiple levels of competitiveness and lack of love between the players, that might take even more than a decade to happen.

There are so many things to say on so many levels, this could take all night.

Of all the bush league things that could be done, this is a topper. If you thought the days of animosity and dirty tricks was over in Silicon Valley because we had somehow grown up — or at least aged out of it — tonight is a sobering reminder that they play by bare knuckles rules out here. Let’s try to pull this apart and analyze some of the levels of meaning. ALL OF WHAT FOLLOWS IS AT BEST A HYPOTHESIS, MY HYPOTHESIS.

First off, you don’t cancel a keynote on the speaker less than 24 hours in advance regardless of the reasons short of moral turpitude or an ax murder. We don’t have motives as I write this so it is my assumption that the Benioff keynote scheduled for tomorrow morning had no justifiable reason for termination.

Even if you are Larry and it’s your show, if you made the agreement, most likely a year ago, you keep your word. If you don’t like the idea, you cancel next year’s keynote a year in advance, not the night before. One immediately has to wonder why this ever got started in the first place.

So, what’s going on here?

Marc Benioff knows how to get under your skin if he wants to and that should be no surprise to anyone. For all we know, Cole Porter was imagining Benioff when he wrote the lyrics to “I’ve got you under my skin”. Tom Siebel got a big dose of Benioff when they were competing. I remember one of Benioff’s first attacks on Siebel featured a third grade kid named Dave who had to write one hundred times on the blackboard, “I will not let Siebel take my lunch money.” Ouch! That was effective.

People loved the Dr. Dave campaign in part because it pitted a real David against a goliath and it worked brilliantly. Benioff hounded Siebel relentlessly until time and circumstance made Siebel decide to throw in the towel and allow itself to be bought by Oracle where it remains today.

Today’s dust up can be seen as a reaction by Oracle to several years of Benioff sniping about cloud computing and Oracle’s lack thereof. Let’s review. Benioff started giving a keynote during OpenWorld a few years ago. As one of Oracle’s biggest customers it was a privilege but also something that the vendor — Oracle — could not easily refuse given the circumstances. At that point, Oracle had CRM OnDemand but Benioff had the momentum in cloud computing, CRM and social media.

Things only got better or worse depending on which horse you rode. Salesforce continued to grow and gain market share by offering more products like Chatter and socialized CRM. Oracle made incremental improvements to its core systems and continued to offer several flavors of CRM including CRM On-Demand and Siebel. Oracle is a tough competitor in CRM, not doubt about it.

When Oracle bought Sun and began bringing to market its Exa- series of hardware including storage (Exadata) and compute servers (Exalogic), Marc ridiculed them as cloud in a box and not real cloud computing. This year in the wake of a very successful Dreamforce, Benioff was ready to come out talking about collaboration, the social enterprise and the social customer. I think the dominant concern might have been letting this cannon loose in the OOW chicken coop.

Perhaps Oracle had justifiable concerns. If you went through the OpenWorld show floor today and visited the Salesforce booth (Yes, they have a booth!) you would have seen something very strange for a trade show. People from the Salesforce Foundation staffed the Salesforce booth and they were in the middle of preparing aid packages for charity work. There was nothing in the booth relevant to selling Salesforce’s SaaS service.

The foundation was simply recruiting people from the show to do the packing labor as they walked by. It was as if Benioff was saying to Ellison, “See, we don’t need your X-boxes you can do all this to make money and we have a higher calling.

Maybe that was the last straw, I don’t know. Earlier in the day, I had heard that there was a chance the keynote would be moved to the following day but not much later it all came to an abrupt end. Benioff has found alternate space for the speech and it will be held as planned. But meanwhile, Ellison and company look either like a bunch of fools who got played or the school yard bullies. Either way they’ve been pushed into an action they will regret. If this was football, I’d have to say that Salesforce caused its opponents to fumble or to throw an interception.

What precipitated the action is unclear and likely to remain a personal issue between two people who were once mentor and protégée. Why it happened says much about Oracle. They should have been able to behave better or at least in a more mature way but I guess that isn’t the way things always work out here.

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Open World most resembles Forrest Gump’s box of chocolates in that there is such variety that you never know what to expect. At any moment there is equal probability that you will be dazzled, challenged, delighted and perplexed.

This being journalism, perplexity reins as a dominant topic and perhaps the most perplexing thing about the meeting is the show floor which includes large booths from the heavyweights in the industry a.k.a. Oracle’s greatest competition and greatest customers, for example, SAP and Microsoft. Salesforce.com’s booth sits long and narrow moored on the show floor like an aircraft carrier in a crowded harbor.

By the time most of you read this Marc Benioff will have spoken and we will at last have an answer to the question haunting the halls of the Moscone Center. Why would Benioff speak at Open World, the user meeting of one of his staunchest competitors?

You can make all of the arguments you want about how Salesforce relies on the Oracle database to serve its millions of customers, you can invoke arcane game theory to explain this apparent cooperation among competitors if you like – after all the Nobel Prize in Economics was just awarded to two social scientists who studied this phenomenon. Still you are left with an irreducible Why?

Benioff speaks at one today and may have an answer.

In CRM kudos have go to Anthony Lye and his team for their top to tail work with the Siebel and CRM On-Demand suites and the dogged determination to prove the necessity – even desirability – of hybrid premise-based and on-demand approaches to CRM. I will not digress into a discussion of my oft repeated belief that this is a transition state on the way to full Cloud Computing in deference to my hosts and I only wish they would give up the sophomoric assertion that cloud computing is simply vapor.

The CRM team is bristling with innovations for large and small customers –announcing twelve new products, eighty customer driven enhancements, thirty-one new features, a REST API, CRM availability in Microsoft Outlook, and a new Siebel version coming this year. I think there’s more but maybe my note taking is not so good.

Larry Ellison spoke on Sunday night — a cameo in Scott McNealy’s keynote. Ellison made the expected and highly believable statements that rather than letting Sun sink into the, uhh sunset, once the merger is completed, Oracle would increase its investments in Sun systems beyond the hefty investments that Sun had been making.

Oracle’s stewardship of PeopleSoft, J.D. Edwards, Siebel and fifty-five other acquisitions (according to Safra Catz) provide the needed street cred here. Ellison even had fun poking IBM about an internal program they call Sunset reminding all that one man’s sunset was another’s sunrise. He then proceeded to announce significant benchmark superiority over Big Blue. Some things don’t change, benchmark competition is one of them.

But Sunday was McNealy’s time to shine. The justifiably proud Sun CEO rattled off a slew of Sun’s leading innovations in CPUs, memory and file management, operating systems, and, of course, JAVA. Many of us forget how many devices run on JAVA code — without any “JAVA inside” branding — but it’s a lot and McNealy was happy to provide a glimpse.

Ellison will speak on Wednesday to conclude the meeting and my contacts keep telling me that my questions such as those about integrating the sprawling software suite will gain clarity then. We’ll see.

Perhaps the most interesting moment of the show for me so far came on Sunday at the end of McNealy’s speech. He showed a slide meant to sum up his experience at Sun as well as the operating philosophy the company has been run by. The slide said we (Sun),

Kicked butt

Had fun

Didn’t cheat

Loved our customers and

Made money

(I am not a hundred percent on the last bullet, note taking again.)

McNealy concluded by saying of the merger of Sun and Oracle, “Larry’s going to like his new toy.” The statement immediately put me in mind of Newton’s famous summation of his own career when he said near the end of his life:

“I do not know what I may appear to the world, but to myself I seem to have been only like a boy playing on the sea-shore, and diverting myself in now and then finding a smoother pebble or a prettier shell than ordinary, whilst the great ocean of truth lay all undiscovered before me.

I can’t think of a better description of why these very bright people work so hard to make electrons dance. Sure, it’s profitable but at the end of the day it’s even better if the ride has been fun.